BOE to Make Announcement on Credit-Boosting Program TomorrowScott Hamilton
The Bank of England will make an announcement on its credit-boosting program tomorrow as officials seek ways to strengthen the economic recovery by increasing credit to small companies.
The London-based central bank plans an announcement for 6 a.m. on the Funding for Lending Scheme, set up with the Treasury last year, it said today. The program allows banks to borrow treasury bills from the BOE to fund lending.
The International Monetary Fund, whose delegation will visit London next month for an audit of the U.K., has called on Chancellor of the Exchequer George Osborne to do more to aid the economy. He may extend the FLS as soon as this week because the U.K. economy remains weak, a person with knowledge of the plan said on April 21.
Osborne’s growth offensive coincides with a renewed test of his economic stewardship. Data on April 25 will show whether the U.K. has escaped another recession, days after the country lost its top credit grade at a second ratings company. On April 19, Fitch Ratings cut Britain by one level to AA+ and predicted that debt will peak above 100 percent of gross domestic product.
While the median forecast of 37 economists surveyed by Bloomberg News is for the economy to have skirted a slump and expanded 0.1 percent in the first quarter, Bank of England policy maker Martin Weale said on April 18 that he wouldn’t be surprised if GDP fell.
Osborne has been relying on BOE measures to aid the economy during his austerity drive, saying his approach is “fiscal responsibility, monetary activism.”
The FLS started in August and banks currently have 18 months to use the facility and as long as four years to repay.
The FLS extension might be used by Osborne to show the IMF delegation that he is taking steps to aid growth without abandoning his austerity plans. Osborne can also cite a separate Help to Buy program, under which the government underwrites downpayments on homes, as evidence that he is taking steps to support the economy.